Robert McClelland

What is the Real Relationship between Income and Charitable Giving

Many studies have focused on the relationship between income and charitable donations either by comparing income and percentage of income donated to construct a “giving curve” or by calculating the income elasticity of giving. In this article, the authors relate these two types of studies to one another, using 1997 Consumer Expenditure Survey data. They show that giving curves and elasticity models measure different phenomena and investigate ways that the information in each might be combined to enrich future studies of charitable giving.

Econometric Issues in the Analysis of Charitable Giving

In this article, several econometric problems arising from estimating models of charitable contributions are examined. An instrumental variable technique proposed by Clotfelter is used to reduce the bias of the estimated price effect and compare it with other methods. Linear dependence between price and income are reduced by including state and local tax rates and show that the degree of collinear ity is low. By using demographic characteristics, current and permanent income and contributions to different organizations in the Consumer Expenditure Survey, the results are compared with other models, and bias caused by neglecting government expenditures is examined. These comparisons show that the dummy-intercept and the first-difference model omit important permanent effects and that omitting government welfare expenditures biases price elasticities, although the degree of bias may be small.

NEW EVIDENCE ON OUTLET SUBSTITUTION EFFECTS IN CONSUMER PRICE INDEX DATA

In this paper we provide new evidence on the impact on the U.S. CPI of the appearance and growth of new types of product outlets. Our CPI food microdata permit a more detailed categorization of outlet types than in previous studies, and we can adjust for numerous differences in item characteristics. We also examine the effects of changes in outlet mix not only across outlet categories but also within those categories. In our sample, we find that the upward impact on price from increased item quality has offset most, but not all, of the downward impact of lower-priced outlets.

A general dependence test and applications

We describe a test, based on the correlation integral, for the independence of a variable and a vector that can be used with serially dependent data. Monte Carlo simulations suggest that the test has good power to detect dependence in several models, performing nearly as well or better than the BDS test in univariate time series and complementing the BDS test in distributed lag models. Finally, we apply our test in conjunction with the BDS test to examine models of US unemployment rates.

Does Quality Adjustment Matter for Technologically Stable Products? An Application to the CPI for Food

Most indexes in the Consumer Price Index (CPI) use a form of the matched-model approach. It is frequently assumed that this approach accurately reflects inflation for items that have no major trend in quality. In this paper we investigate that hypothesis using CPI data for retail food items. We find that CPI analysts may be correct on average when they decide that new and replacement items are similar in quality. We also find, however, that when sample items are replaced by items of significantly different quality the CPI imputation procedures may underestimate price change and overstate quality change.

Nonparametric Tests for the Independence of Regressors and Disturbances as Specification Tests

We adapt techniques from the literature on chaos and nonlinear dynamics to detect misspecification in models of serially independent data by checking for dependence between the regressors and disturbances. Our tests are nonparametric in that they determine whether the distribution of the disturbances depends on the regressors without identifying a model of dependence or the distribution of the disturbances. In Monte Carlo simulations we find that these tests have good power against dependence caused by omitted variables, incorrect functional form, heteroskedasticity, and similar problems.We also apply our tests to detect misspecification in models of income imputation.

ANOTHER LOOK AT EVIDENCE ON THE DISTRIBUTION OF CERTAIN SPECULATIVE PRICES

Benoit Mandelbrot suggests that prices of certain commodities follow stable Paretian distribution laws. Our results indicate that ARCH-type models fit some Mandelbrot time series fairly well. In other cases, tests for nonlinear dependence and chaos reject the ARCH specification. However, the patterns of dependence exhibited by these data are generally not consistent with the hypothesis that they are generated by a chaotic dynamic process.